Other Topics for the Classroom

America’s Economic Crisis by the Constitutional Rights Foundation (CFR) offers both teachers and students a variety of materials intended to help describe the current crisis within its historical context. By examining historical events, contributing factors and the ensuing forces behind the recoveries, the selected CRF’s readings, discussion questions and Internet based exercises promise to actively engage interested individuals.. This engagement will help anyone with a quest to describe the current crisis, discover historical similarities between past and present, identify differences, and benefit from the lessons learned in the past.

The Crash of 2008: Cause and Aftermath. Authored by James Gwartney, David Macpherson, Russell Sobel and Richard Stroup, this book provides a comprehensive analysis of the current economic crisis which is likely to be the most important macroeconomic event of our lifetime. It addresses the cause, analyzes the future, and considers the often asked question of whether the economy is headed for another Great Depression. The Crash of 2008 PowerPoint slides will help teachers communicate valuable information to students. Multiple choice questions for testing available on request.

Finance and Responsible Lending by Thirteen Ed Online is a lesson plan that uses a video segment from the THE ASCENT OF MONEY and highlights the role of banks and how creditors make lending decisions. Specifically, high school students will learn about the components of creditworthiness. The lesson plan addresses the basics of credit risk. Extended activities include the ability for a student to research personal business interests and discover what it will take to achieve a creditworthy rating.

Managing Financial Institutions by Curt Anderson of the University of Minnesota, Duluth. The near-collapse of the U.S. financial sector in September of 2008 left many wondering what went wrong. Unfortunately, the result was very predictable given the incentives created by a lack of regulation, a high degree of leverage, and earlier financial bailouts provided by the government. This lesson shows how these factors led financial institutions to engage in overly risky behaviors and what measures can be taken by government to lessen the possibility of this happening again.

Complex Topics Made Simple

Activity: Budgeting and Financial Fitness for Life
This feature provides supplementary analysis for the material in Part IV of Common Sense Economics, particularly Element 3 on how to use budgeting to help you save regularly and spend your money effectively. There are three budgeting exercises that can be completed sequentially or separately.

Activity: Demand, Supply and Adjustments to Dynamic ChangeSupplemental Unit 1. Demand, Supply, and Adjustments to Dynamic Change
Common Sense Economics highlights how markets work and their impact on the allocation of resources especially in Part I. This feature will investigate this issue in more detail. It will use graphical analysis to analyze demand, supply, determination of the market price, and how markets adjust to dynamic change.

Activity: Fiscal Policy and Budget DeficitsSupplemental Unit 4. What Is the Unemployment Rate and How Is It Measured?
This feature provides supplementary analysis for the material in Part II of Common Sense Economics. It discusses unemployment. Employment matters. Employment generates income, and income funds spending, saving, investing, and charitable giving. During periods of unemployment, people must draw down savings, withdraw investments, depend on transfer payments like unemployment compensation or welfare, reduce spending, or turn to other means to finance their daily expenses. So, it is important to know what the rate of unemployment or joblessness is and how it is measured.

Activity:Gross Domestic Product: What It Is and How It Is Measured?Supplemental Unit 3 Gross Domestic Product (GDP): What Is It and How Is It Measured?
This feature provides supplementary analysis for the material in Part II of Common Sense Economics, particularly Element 1 which discusses the most widely used measure of output, Gross Domestic Product (GDP). Changes in GDP are also widely used to measure the growth of an economy.

Activity: Monetary Policy: How Is It Conducted and How Does It Affect the Economy?Supplemental Unit 6. Monetary Policy: How Is It Conducted and How Does It Affect the Economy?
Instructors teaching a course that covers the operation of monetary policy may want to use this feature in conjunction with Parts II and III of Common Sense Economics. Part II, Element 5 of Common Sense Economics stresses the contribution of monetary and price stability as a source of long-term economic growth. This supplement provides additional detail on how monetary policy is conducted and considers how it influences fluctuations in the levels of output and employment. This feature, along with Supplemental Unit 5 on “Fiscal Policy and Budget Deficits”, provides students with the most important information about how monetary and fiscal policies influence economic fluctuations.

Activity: What Is the Unemployment Rate and How Is It Measured?Supplemental Unit 4. What Is the Unemployment Rate and How Is It Measured?
This feature provides supplementary analysis for the material in Part II of Common Sense Economics. It discusses unemployment. Employment matters. Employment generates income, and income funds spending, saving, investing, and charitable giving. During periods of unemployment, people must draw down savings, withdraw investments, depend on transfer payments like unemployment compensation or welfare, reduce spending, or turn to other means to finance their daily expenses. So, it is important to know what the rate of unemployment or joblessness is and how it is measured.

Activity: Who Pays for Government or Private Projects and Why It MattersSupplemental Unit 9. Who Pays and Why It Matters
This feature provides supplementary analysis for the material in Part III of Common Sense Economics, particularly Element 8 on the economics of central government planning. Goods and services can be either produced by private enterprises or supplied by the government. They can be paid for either by the consumer directly or by the taxpayer or some other third party. Does it make any difference whether a good is produced by a private firm or by a government enterprise? Does it matter whether the good is paid for by its consumer or by a third party? This supplemental answers these questions.

Video Links

In the four-hour version of THE ASCENT OF MONEY, historian and author Niall Ferguson seeks to explain the financial history of the world, exploring how the complex system of global finance evolved over the centuries, how money has shaped the course of human affairs and how the mechanics of this economic system work to create seemingly unlimited wealth—or catastrophic loss. This video can be broken down and used to illustrate various economic, entrepreneurial and personal finance concepts.

MSN Money is partnering with MoneyTrack, a fresh new public television series about finance and investing that features real people. Pam Krueger and Jack Gallagher show you what works and what doesn’t work when it comes to your money. This website provides numerous video clips that help students understand how to make strategic decisions during this crisis!

Other Resources

The Financial Crisis – St. Louis Federal Reserve Bank outlines events in financial markets from February 2007 to the present. It includes brief descriptions of market events and actions by the Federal Reserve and other government agencies, along with links to press releases, SEC filings, congressional testimony, relative to the St. Louis Fed articles and selected FRED (Federal Reserve Economic Data) graphs. Using primary sources and links to data, the St. Louis Fed site is designed as a hub for finding information related to the crisis.

Credit Crisis: The Essentials – The New York TimesProvides a page devoted to resources about the credit crisis. It includes an overview of the crisis, an interactive media timeline, video of interviews with people across the United States, and links to articles.

Selected Readings

“Does Regulation Prevent Fraud? The Case of Manhattan Hedge Fund,” by Chidem Kurdas (The Independent Review, Winter 2009) As the failure of the hedge-fund firm Manhattan Capital demonstrates, both government regulators and market players can make mistakes resulting from cognitive biases. Responding to such mistakes by strengthening government watchdogs, although often recommended, reduces both the government and the public incentive to learn, thereby creating a vicious spiral of regulation, regulatory failure, and can lead to even more regulation.

“Terrible Credit Crunch of 2008–The Greatest Hoax of All Time?” by Robert Higgs (1/6/09) Last September, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke sounded the alarm, warning that credit markets had frozen and calling for an unprecedented bailout of financial institutions, ostensibly to prevent a collapse of the U.S. economy. Politicians and the press took these claims at face value. However, according to Independent Institute Senior Fellow Robert Higgs, the Federal Reserve’s own statistics tell a very different story: the amount of commercial-bank credit outstanding (perhaps the best indicator of credit-market conditions) hadn’t actually shrunk, but had instead merely reached a plateau from April to September, 2008. In other words, there was no net contraction of credit!